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Australian government rejects investor privileges in trade agreements

Canadian politicians and trade negotiators take note. The Gillard government in Australia has released a new trade policy statement–Trading our way to more jobs and prosperity–that renounces the practice of giving foreign investors extra-judicial rights not enjoyed by local firms in bilateral and multilateral trade deals. Says the report:

In the past, Australian Governments have sought the inclusion of investor-state dispute resolution procedures in trade agreements with developing countries at the behest of Australian businesses. The Gillard Government will discontinue this practice. If Australian businesses are concerned about sovereign risk in Australian trading partner countries, they will need to make their own assessments about whether they want to commit to investing in those countries.

Translation: it is not a government’s job to absorb the risk of investing in foreign countries. The firm should be responsible for the success or failure of its investment, or roadblocks to its activities abroad. Also, “Foreign businesses investing in Australia will be entitled to the same legal protections as domestic businesses but the Gillard Government will not confer greater rights on foreign businesses through investor-state dispute resolution provisions.”

If Canada took the same position, it could have avoided paying out $130 million to AbitibiBowater last year when the firm sued the federal government under NAFTA instead of going through domestic courts. Removing investor-state dispute procedures from Canada’s other bilateral agreements with developing countries would also protect environmental, public health and other measures in those countries from savage investment challenges by Canadian mining companies.

The new Australian policy comes out of a final report last December by the Australian Productivity Commission on Bilateral and Regional Trade Agreements, which heard from international experts on investment arbitration, as well as strong local opposition to the investor-state process. As a result of this input, the Commission recommended against including investor-state dispute procedures in bilateral and multilateral trade agreements.

“[I]t seems doubtful that the inclusion of [investor-state dispute settlement] provisions … affords material benefits to Australia or partner countries,” said the Commission, which “considers that Australia should seek to avoid accepting ISDS provisions in trade agreements that confer additional substantive or procedural rights on foreign investors over and above those already provided by the Australian legal system.”

I wrote at the time that the position of the Commission was similar to that taken by an international statement on investment arbitration by leading academics in the field, which recommends:

States should review their investment treaties with a view to withdrawing from or renegotiating them in light of the concerns expressed above; should take steps to replace or curtail the use of investment treaty arbitration; and should strengthen their domestic justice system for the benefit of all citizens and communities, including investors.

The report comes as Australia negotiates a TransPacific Partnership (free trade area) with Brunei, Chile, New Zealand, Singapore, Peru, the United States, Vietnam and Malaysia. The TPP is very similar in scope and content as the Canada-EU Comprehensive Economic and Trade Agreement. Like in CETA, investor-state dispute provisions will be part of the TPP negotiations. If Australia is going to oppose what it sees as pointless but potentially expensive and damaging investment protections in the TPP, there is no reason Canada cannot revoke its request to include them in CETA.


To write to your provincial or territorial government demanding transparency and debate on the CETA negotiations, use our Action Alert here. If you want to ask why the provinces would agree to investment protections that other countries are rejecting, copy and paste some of this entry or the Australian trade policy report into your letter in the space provided in the Action.